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Conflicting Codes and Codings: How Algorithmic Trading Is Reshaping Financial Regulation

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  • Lenglet, Marc

Abstract

Contemporary financial markets have recently witnessed a sea change with the ‘algorithmic revolution’, as trading automats are used to ease the execution sequences and reduce market impact. Being constantly monitored, they take an active part in the shaping of markets, and sometimes generate crises when ‘they mess up’ or when they entail situations where traders cannot go backwards. Algorithms are software codes coding practices in an IT significant ‘textual’ device, designed to replicate trading patterns. To be accepted, however, they need to comply with regulatory texts, which are nothing else but codes of conduct coding accepted practices in the markets. In this article, I draw on ethnographic fieldwork in order to open these black boxes, while trying to describe their existence as devices encapsulating several points of views. I address the question of a possible misalignment between those visions, and more specifically try to draw the consequences raised by such discrepancies as regards the future of financial regulation.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/11664/1/SSRN-id1616043.pdf
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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/11664.

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Date of creation: 2011
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Publication status: Published in Theory, Culture and Society, 2011, Vol. 28, no. 6. pp. 44-66.Length: 22 pages
Handle: RePEc:dau:papers:123456789/11664

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Related research

Keywords: Financial markets; algorithmic trading; codes of conduct; codings; practices; regulation;

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  1. Daniel Beunza & David Stark, 2004. "Tools of the trade: the socio-technology of arbitrage in a Wall Street trading room," Industrial and Corporate Change, Oxford University Press, vol. 13(2), pages 369-400, April.
  2. Donald MacKenzie, 2006. "An Engine, Not a Camera: How Financial Models Shape Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262134608, December.
  3. Domowitz, Ian & Wang, Jianxin, 1994. "Auctions as algorithms : Computerized trade execution and price discovery," Journal of Economic Dynamics and Control, Elsevier, vol. 18(1), pages 29-60, January.
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